Reports are emerging of food and water shortages at the mines, and accusations that Burmese soldiers forced the families to act as “human shields”.
The capture comes after several days of armed clashes in a strategic area that is home to several gold and amber mines under KIA control.
Church leaders in Tanai estimate that about a thousand people have sought sanctuary at churches in the town.
The Burmese units accused various residents of having links to the TNLA or of protecting its soldiers.
Local authorities in Mandalay region have issued arrest warrants for five protest leaders from the Moehti Moemi gold mine site.